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This year, Spain’s banking sector looks set to shrink to about 10 lenders from more than 40 before the economic crisis, as the government forces banks to recognise steep losses from a housing crash. Small and medium-sized banks will scramble to join forces to meet capital requirements implicit in a new law demanding lenders write down up to 80 per cent of the book value of real estate assets on their balance sheets. Click here for Cloud Computing Also Read Related Stories News Now - 24-hr deadline for Kingfisher to submit revised schedule - Kingfisher assures to restore normal schedule in 5-7 days - Indian banks eye assets of European counterparts - It is time to take money off the table: Jim Walker - Swiss solicits tourists from India amidst EU crisis - Abheek Barua & Shivom Chakravarti: Risk-on in a sweet spot Particular focus would rest on the country’s fourth-largest bank by market value, Bankia. Fears persist over its ability to fund losses from its heavy exposure to the property sector. Only a handful of banks — international leaders Santander and BBVA, domestic lender CaixaBank and Basque Country savings bank Kutxa — are considered strong enough to remain independent and cover capital holes with their own profits. Bankia has insisted it does not plan a link-up with Barcelona-based counterpart CaixaBank, but market sources say it would be hard for the bank to go it alone. "It’s true there were overtures towards CaixaBank, but that has gone cold. It seems CaixaBank is the only one interested in Bankia. BBVA and Santander do not seem up for it," said one banking source. Another expressed doubt Bankia could deal alone, with Euro 3 billion of capital needs with annual net operating profits of Euro 1.67 billion and with its parent company BFA still owing Euro 4.1 billion of state loans given out last year. "The numbers simply don’t add up," the second banking source said. If Bankia opts for a tie-up, it could win more time to write down losses related to real estate. The government has given banks one year to write down losses, but would extend it to two years for lenders involved in a merger process.
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